Do employment NDAs automatically claim intellectual property rights over side projects built entirely on my own time?

No, employment NDAs do not automatically claim intellectual property (IP) rights over side projects. Ownership is governed by Invention Assignment Agreements, not NDAs. If your project is unrelated to your employer's business and created without company resources, it is generally yours, subject to specific state labor laws.

The Distinction Between NDAs and Invention Assignments

Employees often conflate Non-Disclosure Agreements (NDAs) with Proprietary Information and Inventions Assignment Agreements (PIIAAs). An NDA is designed to protect company secrets from being shared with third parties. It does not inherently grant the company ownership of your creative output.

The real threat to your side project is the Invention Assignment Clause. This is the legal mechanism that transfers ownership of your work to your employer. If you signed a broad PIIAA, the company may claim ownership of anything you create during your employment, regardless of whether you used company time or equipment.

Key takeaway: Always check your contract for an 'Invention Assignment' section. If it exists, the scope of that clause is what determines if your side project belongs to you or your employer.

Action Item: Search your employment contract for the word 'Inventions' or 'Assignment.' If you find a section titled 'Assignment of Inventions,' read the scope carefully to see if it covers 'all work' or only 'work related to the company's business.'

Criteria for Protecting Your Side Projects

To ensure your side project remains yours, you must satisfy specific criteria that courts use to determine ownership. Even if your contract is broad, these factors provide a strong defense.

• No Company Resources: Do not use company laptops, software licenses, servers, or proprietary data.
• No Company Time: Perform all work outside of your contracted working hours.
• Lack of Relation: The project must not compete with your employer’s current business or anticipated research and development.
• No Use of Trade Secrets: Do not incorporate any proprietary methodologies or confidential information learned at your job.

Jurisdiction-Specific Protections

Some states provide statutory protections that override overly broad employment contracts. For example, California Labor Code Section 2870 prevents employers from claiming ownership of inventions developed entirely on your own time without using company resources, provided the invention does not relate to the employer's business.

Action Item: Research your state's labor laws regarding 'Invention Assignment.' If you live in a state with strong protections, your contract's overreaching clauses may be unenforceable.

How to Safely Develop Side Projects

If you are concerned about your employer claiming your work, follow this step-by-step process to minimize legal risk.

1. Disclose Prior Inventions: Most PIIAAs include an 'Exhibit A' or 'Prior Inventions' list. List any projects you started before your employment there.
2. Use Personal Hardware: Never install development tools or store code on a company-issued machine.
3. Maintain a Paper Trail: Keep logs of when you work on your project to prove it was done outside of business hours.
4. Seek a Carve-Out: If your project is significant, ask your employer for a written waiver or a 'carve-out' agreement that explicitly excludes your project from the assignment clause.

Key takeaway: Never assume your employer won't care about your side project. If the project becomes successful, the incentive for the company to claim ownership increases significantly.

Action Item: Create a separate folder on your personal cloud storage for all project-related documents and code, ensuring no company-related files are ever mixed in.

Common Red Flags in Employment Contracts

When reviewing your contract, look for these specific red flags that indicate an employer is attempting to claim broad ownership:

• 'All Inventions' Language: Clauses that claim ownership of 'all inventions conceived or reduced to practice during the term of employment.'
• 'Related to Business' Ambiguity: Phrases like 'or related to the Company’s actual or anticipated business' are often interpreted very broadly by courts.
• 'Company Equipment' Clauses: Language that claims ownership if *any* company resource—even a minor one—is used.

Action Item: If you identify these red flags, consult with an employment attorney before signing or consider requesting an amendment to narrow the scope of the assignment clause.

Understanding the nuances of your employment contract is critical to protecting your personal intellectual property. TermScore can automatically analyze your employment agreements to identify aggressive invention assignment clauses and potential risks to your side projects, giving you the clarity you need to innovate with confidence.